Irish Property Market chat II - *read mod note post #1 before posting*

Blut2

https://www.boards.ie/discussion/comment/120674524#Comment_120674524

They don't when the landlords are REITs, or anyone not tax resident in Ireland, or anyone not already in the top PAYE tax bracket. Only a very small percentage of landlords receiving HAP payments pay full tax on it.

Its absolutely not far cheaper. Instead of having hundreds of millions of euros of that €1bn (and rising) a year instantly drain out of Ireland into Canadian and German pension funds that money would be far better off being kept in the Irish economy, creating jobs and building assets the government would retain long term.

BlueSkyDreams

https://www.boards.ie/discussion/comment/120674467#Comment_120674467

Why not just create mixed use from the start? why prioritise people on low incomes for housing and create a ghetto?

I would say very few(if any) large exclusivley social housing estates would be considered salubrious.

Bass Reeves

https://www.boards.ie/discussion/comment/120673711#Comment_120673711

It's not as simple as it seems. HAP is only 65%ish of the budget. I only have the 2021figures.

https://www.irishtimes.com/business/economy/government-spent-close-to-900m-on-rent-subsidies-in-2021-1.4787134

The rest is made up of rent supplement and rent assistance. RA is paid in the case of domestic violence, where tenants are in serious health issues and is mainly a medium term support payment (I think the limit 1-2 years max except in exceptional circumstances). Rent Supplement is paid in emergency situation where a tenant becomes unemployed, death of a breadwinner where tenants need a deposit ( limited to one months rent) etc

RS and RA will always exist even if we houses all HAP tenants. However they skew the costs of HAP as many include it in the HAP cost when they should not be.

Working off the 2021 figures it works out at less than 7k/ household. It's extremely good value for the government. It hard to know if the cost is net of tenant contribution to LA I suspect it is.

Looking at the amount of arrears owed to LA by tenants it puts HAP into more perspective as they have huge control over tenant non payment. It's exceptional value to government and LA. It takes house maintenance, management, refurbishment and tenant non payment ( when last was a LA tenant evicted) costs away from government

BlueSkyDreams

https://www.boards.ie/discussion/comment/120674504#Comment_120674504

Yes, social housing should be available for all and as HAP is for the private market, we could house some folks in their current place a little longer and prioritise new social housing for working people, especially key workers, whom cant afford private rents and may not qualify for HAP.

But as long as we can avoid the 100% social ghetto, i'm happy enough.

I just dont see the govt taking that approach though and I think they will continue down the path of housing the no and low paid, at the expense of the masses of moderatley paid folks.

I would also like to see social housing house shares, to reduce the list more quickly and maximise the social housing stock we have.

suvigirl

https://www.boards.ie/discussion/comment/120674627#Comment_120674627

I agree that they should, but I think at the moment, there is serious pressure. Councils buying private housing, hap and rent allowance etc, if they could do that first, they don't need to fill estates with social housing, just get it done now, as a matter of urgency and leave some space in these estates for further affordable housing. It's really a crisis now.

Jonnyc135

https://www.boards.ie/discussion/comment/120670625#Comment_120670625

I disagree, psychologically an increase in mortgage payment from 1200 to say 2000 grand a month due to re fixing at these higher rates will cause serious knock on affects in our economy, money won't be spent elsewhere and the real economy that's already in a precarious situation will get far worse

Bass Reeves

https://www.boards.ie/discussion/comment/120675727#Comment_120675727

What interest rate increase would you need for a mortgage to go from 1200 to 2k???????

Murph3000

Interesting to see the ECB warning of "disorderly" declines in property prices across Europe.

They seem to be highlighting Countries with high proportions on variable rates for most immediate drops, including Portugal, Spain, Estonia, Latvia. The longer rates stay high, the bigger and more widespread impact will be.

But they also highlight areas where institutional investors have big positions, mainly Dublin, Paris, parts of Germany, Madrid and Lisbon. Already seeing investors flee the space and taking profits. Definitely not seeing new investors. There is risk free earnings out there now.

Jonnyc135

https://www.boards.ie/discussion/comment/120675910#Comment_120675910

A refixing off a fixed rate of 2% got during those low rate times now would result in a mortgage going from 1200 to 1800, that's off the AIB switching calculator. If rates go a little further with the ECB then it would be closer to that 2000 mark, I don't care what anyone says that refixing rate even now is after tax 600 loss on disposable income.

combat14

https://www.boards.ie/discussion/comment/120675727#Comment_120675727

the money not being spent elsewhere is the exact intention of the multiple ecb rate rises ...

Blut2

https://www.boards.ie/discussion/comment/120674633#Comment_120674633

HAP is absolutely cheaper in the short term, thats why it was introduced - its the exact problem of Irish governments taking short term, inefficient solutions instead of longer term ones they think they won't see electoral benefit from (see also: large scale infrastructure projects). But the problem is its long term value (and its ineffectiveness).

HAP was €515mn by itself last year, for 59,258 households[1]. A cost closer to €9k per household. What is the yearly maintenance cost for someone in a local housing unit? I struggle to believe its over €9k per year, if you're calling this "extremely good value" in comparison.

The HAP cost is also a 45 per cent increase on the €354.6 million spent four years earlier in 2019. Its expanding rapidly, from an already hugely wasteful amount.

To quote the article below "“What you want it for is to bridge gaps and to create flexibility. Any public housing system requires HAP to be an element of it but the problem is the scale of our reliance on it,” -- A small amount of households on HAP would be useful/reasonable, say approx 10,000 households. But theres no excuse for almost 60,000 to be on it.

Imagine if 50,000 of those HAP households were in social housing instead, and the private rental market had access to 50,000 new units tomorrow. That would make an absolutely huge impact on the housing crisis in Ireland.

[1]https://www.irishtimes.com/ireland/housing-planning/2023/06/05/record-515-million-paid-to-private-landlords-under-hap-scheme-last-year/?utm_source=dlvr.it&utm_medium=twitter

combat14

https://www.boards.ie/discussion/comment/120678877#Comment_120678877

wow so almost 60k houses are getting on average 9k per year in free housesing supports or almost 15k per year free support if on higher rate of tax

seems like an incredibly unsustainable model

J_1980

https://www.boards.ie/discussion/comment/120678877#Comment_120678877

And where are these 60k houses coming from????

taken from private sector that won’t be built instead.

not changing anything.

also average construction costs of 350k, 60k* 350k * 3% financing = 630mm annual financing costs. HAP is actually cheaper as you only subsidise social housing tenants partly.

”cheap sociL housing” is a scam, there’s a reason why it was all sold off previously. At 3+% interest rates it’s massively money losing.

DataDude

Looking at the recent CSO stats on wages and house prices. Given that house prices are now falling, and wages rising rapidly. On a pure price to income ratio, housing is now approaching 2018 levels of ‘affordability’. Wages up 24%. House prices up 29% since Q1 2018. Average mortgage rate in 2018 was 3.2% so a bit easier to service the debt back then than now to be fair.

Seems likely that wages continue to go up strongly and house prices stagnate or fall further in the short term. Could push us back to 2016/17 levels of price to income ratios or so which would be a really great outcome.

Think the focus on house prices in nominal terms is misguided. Even though there has been no massive drop in nominal prices, real prices are plummeting at present. Hopefully it continues, could lead to much more affordable housing without all the pain of negative equity for many.

https://www.cso.ie/en/releasesandpublications/ep/p-elcq/earningsandlabourcostsq42022finalq12023preliminaryestimates/

Murph3000

https://www.boards.ie/discussion/comment/120679090#Comment_120679090

Interesting point on salaries rising, but I doubt it paints the whole picture at all. I know in my industry, several people have got raises, but these are mostly people who already own houses and were already in high paying jobs.

The average salary in Ireland is just over 44k!!. This seems incredibly low relative to the cost of housing (is this be right?). Especially low when we consider the cost of the mortgage now and the cost of food etc.

If anything, houses are more unaffordable then ever. In fact, the very reason houses are falling, is probably because they have become unaffordable.

DataDude

https://www.boards.ie/discussion/comment/120679182#Comment_120679182

All very anecdotal ‘my company’. Sure in mine it’s been the opposite 7.5%-9%+ increases for all non management staff. Less for execs etc.

We can only look at CSO stats as the measure of average income and they’re at up 24% since 2018. That is a fact. House prices are up 29%. That is also a fact. So on average we are getting back towards 2018 levels. Felt they were also a bit elevated so would be good to get back to around 2016, which purely arbitrarily ‘felt’ like a reasonable point for housing affordability. If we got back there I think that would be a great result. 2012/13 clearly never happening again.

Housing affordability is still terrible by historic standards but thankfully going in the right direction. I think it will continue.

Average income typically includes part time workers. Although it can also be ‘skewed’ by high earners. Per CSO average full time salary in 2020 was €49k. Roughly 4% per annum growth since then, so suspect average full time salary is now roughly €55k.

https://www.irishtimes.com/business/economy/average-full-time-salary-in-republic-nearly-49-000-1.4289348

Murph3000

https://www.boards.ie/discussion/comment/120679199#Comment_120679199

I pulled 44k from first google result. Who knows, both seem low to me.

Blut2

https://www.boards.ie/discussion/comment/120678982#Comment_120678982

HAP was begun in 2014, at a time when there was plenty of excess capacity in the construction industry in Ireland. Social housing wouldn't have been built in competition with the private sector construction for most of the last decade, it would have been in addition.

"also average construction costs of 350k, 60k* 350k * 3% financing = 630mm annual financing costs. HAP is actually cheaper as you only subsidise social housing tenants partly"

You're ignoring the fact that the money used to construct houses would largely stay in the Irish economy, and create Irish jobs - paying builders, Irish companies/suppliers etc. Whereas a large part of the HAP money goes to REITs and foreign landlords, ie straight out of the country. The former is much, much more beneficial to the overall economy of Ireland than the latter.

You're also ignoring that the financing costs in your simplified example would decrease ever year as the principal was paid down. Whereas HAP outlay is growing by 10% per year, with no sign of that stopping...

edit: to put this in a simplified/personalised example, and since this is the property forum - would you rather 1) get a mortgage and buy a property, knowing you'll have to pay interest on the mortgage but also that you'll gradually pay down the principal over the years and own the asset long term? or 2) comitt to renting a property for decades, with the rent costs going up by 10% per year, and no potential to ever own it? Which do you think would be the better value proposition over decades?

Because the Irish state has spent most of the last decade focusing efforts on doing option '2', which I think most people on this forum would agree isn't exactly conventional rational economic thinking.

Bass Reeves

https://www.boards.ie/discussion/comment/120679410#Comment_120679410

You are incorrect about the amount of HAP going to Reits. Reits mainly have contracts with LA for long term rentals. I am not sure if they are included in the HAP figures.

HAP is paid mostly to smaller LL that may have 3-4 properties at most. It's incredible value for LA and government. These LL's carry not just the capital costs of the houses but the maintenance costs as well.

A couple of years ago after a problem tenant left I hade to repaint and repair a house. I actually got a painting quote which was 1.2k. that was aside from the cattle box of rubbish I took out of there along with repairs to a wardrobe, bathroom door and plumbing repairs.

The house would be valued at 100k. The HAP payment at present to a single man is 420/ month ( he pays 120 to the LA so 300 net) net that figure works out at 3.6k/ year a couple would get 520 less there contribution.

Maintenance costs are horrendous look at your own or your parents house. Painted the outside our own house lately paint cost over 200 euro alone. Labour input was in the order of 50+ hours and I have excellent painting equipment.

quokula

These stats put Ireland's price-to-income ratio at 7.3 which is the 14th most affordable in the world, and most (not all) of those ahead of us are outlier oil rich Arab states. So not too unaffordable in reality.

It's fluid, but as people have mentioned wages are generally trending up strongly while house prices are quite stable, which is only going to increase affordability. This is by far and away a more desirable trend than simply dropping house prices as it is good for both new buyers and existing mortgage holders.

Villa05

Figures are a bit dated (2021) but only 20% of employees pay the higher tax rate. That leaves a hell of lot employees on salaries that would not support a mortgage at current prices

The same statistics show only about a third earned more than €865 per week, or €45,000 per year.

This is roughly what workers need to earn to see the full benefit of the €1,000 tax cut, although marital status can affect this figure.

The latest statistics from Revenue show that there were a little over 500,000 earners out of a total of 2.5 million paying the higher rate of tax in 2018

“It’s really somewhere between a quarter and a third probably of individuals who would benefit from the tax cut,” said Roantree.

https://jrnl.ie/6082032

newmember2

https://www.boards.ie/discussion/comment/120679090#Comment_120679090

What am I missing, surely giving people more money, with a limited supply, and the price of houses can only inflate more?

Blut2

https://www.boards.ie/discussion/comment/120679476#Comment_120679476

I've heard the complete opposite on HAP payments to REITs. Do you have sourced figures to back up this?

There are currently almost 60,000 HAP households[1]. There were only 134,000 smaller landlords in Ireland in 2021[2], and that figure is by all accounts dropping considerably per year - so its probably closer to 120,000 by now.

If HAP was paid "mostly to smaller landlords" then a good half of smaller landlords in the country would be receiving HAP. That seems extremely statistically unlikely.

[1]https://www.irishtimes.com/ireland/housing-planning/2023/06/05/record-515-million-paid-to-private-landlords-under-hap-scheme-last-year/

[2]https://www.cso.ie/en/releasesandpublications/fp/fp-trsi/therentalsectorinireland2021/landlords/

DataDude

https://www.boards.ie/discussion/comment/120679574#Comment_120679574

House prices have diverged massively down wages due to limited supply since 2012. Hopefully now as supply has ramped up heavily that gap can close.

But the gap can close in two ways. Either house prices go down, or wages go up. I think what we’ve seen over the last 12 months - more housing being built, house price inflation going to 0 or slightly negative, wages going up is the best way for the gap to close. Hopefully that continues and we can get back to ‘affordability’ without massive negative equity issue.

Murph3000

https://www.boards.ie/discussion/comment/120679688#Comment_120679688

Wages arent going up for a while, if anything I can see drops over next year.

DataDude

https://www.boards.ie/discussion/comment/120679760#Comment_120679760

Wages been trending up for years, and really gathered extra momentum in the last 24 months.

Inflation is high. Unemployment is the lowest in the history of the state. We’re beyond ‘full employment’. The government has insane surpluses that all the unions are eyeing up already…

Wages to not rise is a very brave call to say the least!

Murph3000

https://www.boards.ie/discussion/comment/120679803#Comment_120679803

I know, for me personally, my salary has gone up massively in the last 24 months.

From someone in upper management, not a very brave call. Rises have been unwinding and now heading in other direction. A lot of companies are actually trimming or considering it.

Additionally, big bonuses are likely to be gone in 2023.

DataDude

https://www.boards.ie/discussion/comment/120679820#Comment_120679820

I don’t know what industry you’re in because we and any company I know of spend 90% of our time worrying about how to retain staff and hire for new roles.

It’s a top risk discussed at board level in many companies right now. We’re having to pay retention bonuses regularly, counter offers all the time and every single new hire is negotiating a signing on bonus, even at junior levels. It’s become industry standard in financial services.

If you can cut people’s wages when unemployment is under 4% then fair play to you. You must be in specific part of the economy that is struggling.

Murph3000

https://www.boards.ie/discussion/comment/120679820#Comment_120679820

Ok, lets agree to disagree. The rest of 2023 will tell the story.

I hope I am wrong.

ingo1984

https://www.boards.ie/discussion/comment/120679803#Comment_120679803

On average people are worse off now in real terms than they were just after the financial crash of 2008. Whilst wages may be increasing in the past two years, they've a long way to go to match the inflation experienced over the past 15 years.

Every housing market normally reaches an affordability peak. I believe this is 9 times the average salary. We must be approaching that level by now. Given the government's supports already propping up the market for the past while, with further interest rate increases on the horizon I can't see prices being driven up any higher. If you took the LAs and councils out of bidding on the private market I reckon you'd see significant drop off in prices.